The PM appointed close ally Grant Shapps to replace him — his fifth cabinet job in the past year alone.
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Mr Wallace, who is quitting politics at the next election, said in his resignation letter: “I genuinely believe that over the next decade the world will get more insecure and more unstable.
“We both share the belief that now is the time to invest.”
The appointment of Mr Shapps has raised concerns from the Army.
Senior figures fear his lack of experience in the brief means he could drop the ball on pushing for cash for our struggling forces.
Former chief of the general staff of the British Army, Lord Dannatt told Sky: “We have a new Defence Secretary who knows very little about defence, and it’s a complex portfolio.
“It will take him quite some time to get up to speed. I think there is a risk that certainly the debate on resources for defence stagnates, at least until Grant Shapps can get his head around his portfolio.”
He said army chiefs will be hoping he really can “push the case for defence”.
Lord Dannatt added: “There is a very strong case that we should be investing more in defence than we currently are. Ben Wallace knew that.
“Ben Wallace was arguing for it. Is that discussion going to continue? Or will Grant Shapps choose to go quietly?”
Mr Shapps has served as Home Secretary, Transport Secretary, Business Secretary and Energy Secretary before his latest appointment.
Tory MP Bob Neil defended the move, saying: “He’s bright, he picks up the brief quickly.”
As The Sun revealed, the PM carried out a limited mini-reshuffle of his top team, before MPs go back to Westminster next week.
Mr Sunak’s former special adviser Claire Coutinho was bumped up from the junior ranks to take over from Mr Shapps as Energy Secretary.
Backbencher David Johnston MP was promoted into her vacant role as Children’s Minister.
The PM is expected to save a wider reshuffle of his top team ready for the next election for after party conference season and the King’s Speech in November.
Boris Johnson led the tributes to Mr Wallace, who had served as Defence Secretary since being appointed by him in 2019.
The ex-PM said: “A fine Defence Secretary who got so many calls right — especially on Ukraine.”